Catalio closes fund after an evolution of strategy and target

The firm's first special situations strategy focused on biotech companies raises $85m.

Editor’s Note: PDI posted much of the story below, on 10 November, under another headline stressing the difference between the closing amount and the original target. Upon the receipt of further information about the evolution of the fund, we decided to expand and amend the story as below. The new headline is appropriate to the new material.

Catalio Capital Management announced the close of its first special situations fund, Catalio Credit Opportunities Fund I, with more than $85 million in commitments.

Although the initial target was $200 million, according to Private Debt Investor data, the firm says that the history of the fund is one of an evolving strategy and that it changed the target earlier this year.

At the time of launch in August 2021, the fund was conceived to pursue a traditional credit strategy. But over time the firm pivoted to a special situation strategy instead. The firm adjusted the target to $50 million, with a cap at $100 million. It decided it would deploy a fund of that size until early next year, given current market dislocations, and then reevaluate.

Catalio expects to change the fund name accordingly, to Special Situations.

In a statement, the firm said the fund will capitalise on a robust pipeline of debt and structured equity opportunities during the current period of market dislocation and beyond, and that it has already made several investments.

The vehicle is designed to offer tailored debt and structured equity to the next generation of biotech companies as they meet “critical milestones”. It operates predominantly in the US but a spokesperson said it has the flexibility to go abroad, and the firm has a presence in the UK.

The founders of Catalio, George Petrocheilos and Dr Jacob Vogelstein, said in the statement that their strategy – senior debt, with a geographical focus on North America – “provides exciting biotech companies the necessary capital and flexibility to scale their platforms”. The fund offers investors a combination of contractual cashflows, current income and downside-protected forms of equity participation. It aims for strong risk-adjusted returns.

Those biotech borrowers are small and mid-sized private companies at various stages of growth.

Catalio, headquartered in New York, also has offices in Baltimore and London. It manages more than $1 billion across private equity, private credit and its public equity strategies.

In May of this year, Catalio closed on Catalio Nexus Fund III at $381 million, well above its $300 million target.